An Idiot's Overview of Why Western Capitalism Is
By Alan Hart
Redress, Al-Jazeerah, CCUN, December 8, 2011
Alan Hart argues that neglect of the impoverished 80 per cent
of the world’s population – potentially a huge market for the West's
consumer capitalism – by the richest nations, coupled with the
shortsightedness, greed and stupidity of banking chiefs and deregulation of
the banks and financial markets by Western politicians, are at the root of
the crash of Western capitalism.
The idiot of the headline is
me, in the sense that I am not an economist and have never had any formal
association with study of the theory and practise of economics.
way back in the early 1970s, when I was researching and producing an epic
documentary on the everyday reality of global poverty and its implications
for all, I began to understand why what is today called Western capitalism
was bound to crash.
When I reflected on what I had witnessed and
learned while researching in 120 countries (as well as at the World Bank and
many UN agencies) and filming in 69 of them, I let commonsense be my guide.
It led me to the conclusion that capitalism was not of itself the problem.
It was the short-sighted and stupid way Western capitalism was managed.
Now I’ll put some flesh on that bone.
Poor world versus shortsightedness and stupidity
early 1970s truly informed development experts were drawing attention to the
fact that our one small planet was divided into two worlds – the rich world
containing about 20 per cent of humankind (and known in development jargon
as the North), and the poor world containing about 80 per cent of humankind
(and known in development jargon as the South).
“If we don’t now invest in the development of the poor of
the world and bring them progressively into the market place
with purchasing power, we are going to run out of customers
in the numbers needed to buy what we have to sell in order
to sustain our system.”
In the poor world an estimated 15 million children under five were dying
each year from malnutrition and related and easily preventable diseases such
as diahorrea, measles and whooping cough – in a word poverty, abject
poverty. And an estimated 300 million more were born brain damaged because
of malnutrition in the wombs of their mothers.
But those statistics told only a part of the story. The majority of the
human inhabitants of planet Earth were living on the margins of life,
without some and in many cases all of the basic necessities for life –
shelter, adequate nutrition, clean water, health care, education and
On each and every continent I asked the
poorest parents what was the one thing they most wanted. This was before the
age of the mobile telephone and I expected many of them to say a television
or some such gadget. What they all said in their various ways echoed one of
the poorest Indian women. Her answer was, “Education for my children so they
don’t have to live like animals as we do.”
The rich nations were creating their wealth by selling goods and
services. It followed that if this wealth creating process was to have a
sustainable future and rich world citizens were to enjoy ever rising
material standards of living as promised by their politicians, the global
market place needed more and more consumers with the purchasing power to buy
what the rich world nations had to sell.
If the managers of Western capitalism (corporate chiefs, bankers and
politicians) had not been shortsighted and stupid, they would have said to
themselves something like the following. “If we don’t now invest in the
development of the poor of the world and bring them progressively into the
market place with purchasing power, we are going to run out of customers in
the numbers needed to buy what we have to sell in order to sustain our
Putting greed before need
If the necessary investment had
been made over 10, 15 and even 20 years (it would have needed that amount of
time in order to guarantee that the money and other development assistance
provided could be absorbed and put to best use with minimum corruption),
victory in the war against global poverty and underdevelopment – the only
war that matters – would have been assured. To give just one example. The
disastrous population drift from the rural areas, where there was a future,
to the urban centres, where there was not and is not a future for many of
the drifters, could have been halted and even reversed.
investment needed on the necessary scale would have meant that the investing
rich world nations would not have grown so rapidly and their citizens would
have had to accept a little less in the way of ever rising material
standards of living, but that would have been a small price to pay for
giving Western capitalism a sustainable future and all of our children
wherever they live the prospect of a future worth having. (Whereas today
they do not have a future worth having.)
“Instead of starting down the road to making capitalism
work for the benefit of all in global terms, the system’s
Western managers opted to keep things going by flooding the
rich world with credit cards to enable its citizens to live
beyond their means and get deeper and deeper into debt.”
Instead of starting down the road to making capitalism work for the
benefit of all in global terms, the system’s Western managers opted to keep
things going by flooding the rich world with credit cards to enable its
citizens to live beyond their means and get deeper and deeper into debt. “I
need” was replaced with “I want”. (My working class father used to say to
me: “Boy, if we can’t afford it, we don’t look in the shop window.”)
There was bound to come a time when rich world citizens simply could not
afford to go on buying on the scale needed to keep Western consumer
Then, partly to fuel debt-driven consumer and
government spending, the greed-driven, totally irresponsible bankers drove
the final nail into Western capitalism’s coffin by playing their leveraging
games, producing debt instruments with a face value of hundreds of trillions
of US dollars but which were not backed and supported by real assets. (A
good friend of mine was the senior risk manager for one of the world’s
biggest banks headquartered in London. She told me that for five years she
and her team tried to warn top management that leveraging with Mickey Mouse
instruments was creating a catastrophe, but top management didn’t want to
listen. It was focused only on bonuses.)
If Jeremy Clarkson had said
that banking chiefs should have been taken out and shot in front of their
families, I would have smiled and said to myself, “If only.”
would not have bailed out the banks with taxpayers’ money. I would have let
them go bust. (The first rule of capitalism is supposed to be that if you
get it wrong you go bust.) But before making that decision public I (as
prime minister) would have said to my people something like the following.
“Don’t panic. The money we would have to put into bailing out reckless and
irresponsible banks will instead be used to create a new national bank
which, rather like the high street banks of the old days, will exist only to
serve the needs of their customers.”
There’s no question that banking
chiefs were short-sighted, greedy and stupid, but they were not the
architects of what future historians will call the crash of Western
capitalism. They, the architects, were the politicians who deregulated the
banks and financial markets.
The leading architect was Britain’s
Prime Minister Margaret Thatcher. On 27 October 1986, she initiated the “Big
Bang” in the City of London, the sudden deregulation of the banks and
financial markets. In the name of “financial liberalism” she truly believed
that markets would work better, more efficiently, if they were free of rules
and restrictions. In her view millions of decisions made every day by
traders in a free market would be better for all of us than decisions that
had to be made with reference to rules and regulations drawn up by
committees of the great and the good.
Though I might be exaggerating
to make a point and may be misrepresenting her to some extent, she seemed to
be saying: “We need not bother too much with our old industries and ways of
creating wealth, the banks and the markets will do it for us.”
were to prove that she could not have been more naive and more wrong, but
before they did American presidents starting with Ronald Reagan had followed
Police state or new start?
My understanding of the
situation today can be summarized as follows. The debts of Western
governments are so big that no Western country will be able to generate the
growth and so the money needed to repay them. On that basis I can see only
two scenarios for the future.
One is that in order to repay the
debts, governments slash expenditure across the board, cutting, cutting and
cutting back massively on budgets for everything, including state pensions
and social welfare benefits and services. Unemployment rises to unthinkable
levels and living standards plunge to unacceptable levels. Eventually the
citizens revolt and violence escalates. What passes for democracy is shut
down and martial law is established. Orwell’s 1984 finally arrives. (Soon
after Edward Heath ceased to be prime minister, my wife and I had lunch with
him. I asked him what his biggest fear for the future was. I expected it to
be related to global poverty because he had been a member of the Brandt
Commission which studied it. His reply, calm in delivery and matter of fact
in tone, was, “That Britain will become the first police state in the
In the other scenario all debts, including
mortgages on homes, are written off and we all start again.
definition a restart would have to be based on a rock-solid commitment to
fairness with a real intention to make capitalism work for the benefit of
“America’s financial doomsday”
“Barring a miracle, an historic, world-changing event is
about to end the American way of life as we know it. This
monumental event will plunge vast numbers of families into
the nightmare of poverty, homeless and hunger.”
Martin Weiss, founder of Weiss Rating Agency
This idiot is in quite good company. American Martin Weiss is the founder
of the Weiss Rating
Agency (WRA). In his latest presentation he makes the following claims
about his agency’s astonishing success in predicting economic disasters of
the past 40 years, a claim which is confirmed by all the major American
newspapers and economic journals.
Months in advance WRA warned
about the S&L [savings and loans] crisis of the 1980s; the great
insurance company failures of the 1990s; plus the great “Tech Wreck” of
the early 2000s.
WRA was the only firm in the world to warn of
the financial crisis of 2008 more than a year in advance, specifically
naming nearly every major company that later collapsed.
Today Martin Weiss says this:
Barring a miracle, an
historic, world-changing event is about to end the American way of life
as we know it. This monumental event will plunge vast numbers of
families into the nightmare of poverty, homeless and hunger. In a worst
case scenario you will see soaring crime, the confiscation of property,
the suspension of civil rights and even the enforcement of martial law
by the US military.
The world-changing event he is anticipating is a decision by China to
stop buying US debt, which will mean, he says, that America will no longer
be able to borrow money; and that, he adds, will see the beginning of
“America’s financial doomsday”.
My own biggest fear, which I have
been expressing to friends in private for a number of years, is that the
unfolding economic crisis may take us all the way to World War III. It could
happen for two related reasons. One is the need of governments to deflect
the attention of their own people away from the mess within. The other is
the need to have an outside party to blame. There’s a case for saying that
some American politicians are already setting up China for blame.
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